The Debt Ratio

Education Sector has just published a new report that offers a reasonably comprehensive way to look at a form of college success. According to the report:

Students choosing colleges and policymakers governing higher education need an overall measure of value, one that combines debt and graduation.

Education Sector has created such a measure, the “borrowing to credential ratio.”
For each college, we have taken newly available U.S. Department of Education data showing the total amount of money borrowed by undergraduates and divided that sum by the total number of degrees awarded.

This is a more sophisticated version of the “ is college worth it” discussion.

For a few years this sort project has been hampered by the fact that the only way to do this comparison of college value was to look at median income earnings versus tuition. Not only is this troublesome because it’s based on the sticker price, which a lot of students don’t pay; the problem is that even tuition itself isn’t really paid by students; it’s mostly paid by their parents

Ed Sector’s calculation based on debt is interesting because it addresses the real cost of college, that which students eventually end up paying. According to the report the debt to degree ratio is getting higher in recent years (schools are saddling students with more debt relative to the number of degrees they issue. The report also finds that for-profit colleges are responsible for much more student debt per degree than traditional colleges. The average for-profit results in more than $40,000 worth of debt per degree issued. The average public college degree results in about $18,000 worth of debt. Private colleges were slightly higher (about $22,000 per degree) but still about half of for-profit schools.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer